Some Economists See Bank of Japan Holding Fire All Year

All eyes were on Bank of Japan Governor Haruhiko Kuroda during a news conference April 8.

Bloomberg News

Most economists have for some time expected the Bank of Japan to implement further monetary easing this year, so much so that the central bank governor’s comments this month that such a move wouldn’t come anytime soon helped send stocks sharply lower and the yen higher. But some opinions are shifting–toward no action at all.

A few days after his initial comments, BOJ Governor Haruhiko Kuroda met with Prime Minister Shinzo Abe, and afterward said he had reassured Mr. Abe that the central bank would take the necessary steps to meet its target of achieving 2% inflation by next spring.

The majority of 11 economists surveyed last week by The Wall Street Journal said they expected the central bank to take further action later this year. None said they expect it to do so at its one-day policy board meeting Wednesday. One expects action in the current quarter, five in the third quarter and one in the last quarter.

Still, four of the 11 said they expected the BOJ to refrain from any further easing this year. That’s up from only one who took that position during January’s survey, although not all of the same economists were surveyed.

Mari Iwashita, senior market economist at SMBC Friend Securities, had previously anticipated further easing in July at the earliest–if the sales tax increase that took effect April 1 had hit consumption hard.

But the effects of the tax increase haven’t exceeded expectations, and the BOJ won’t deem further easing necessary, she said.

“Even if the inflation number doesn’t hit 2% soon, as long as it stays above 1% it would be enough for the BOJ to maintain its current pace of asset purchases,” while retaining the option of further easing in the event of a sharp downturn in the global economy, she said.

Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance, had previously expected the BOJ to take preemptive action to support the economy in March, before the sales tax rose. But now conditions don’t warrant further expansion of its bond-buying, he said, and the central bank will hold steady through the end of the year.

Of course, not everyone sees it that way. Takehiro Noguchi, senior economist at Mizuho Securities, said the BOJ will need to take action in the third quarter to offset the impact of the tax hike and give Mr. Abe the option of allowing the sales tax to rise further to 10%.

Mr. Abe has said a decision on the tax rate will be made by the end of the year, after examining economic data from the third quarter.

All 11 economists said they expect the central bank to stick to its bullish view of inflation in its semi-annual outlook, to be published after the meeting. The median estimate of the BOJ’s forecast for the full current fiscal year was 1.3%, rising to 1.9% for the next year.

The four economists who expected no easing this year predicted full-year inflation of 0.9% to 1.2% for this year.

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